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Though it is affiliated with Hutchison Whampoa’s group member Watson, ParknShop did not fully bring its advantages into use. Instead, it closed several stores in Shanghai.
It is known that the only two stores of ParknShop were closed within May. As ParknShop officially explained, the closure is attributed to the termination of land-using contract. ParknShop also said it would return sooner or later. However, as journalists found, ParknShop’s closing its stores is due to its insufficient localized management in the market of East China and the great deficiency in operation management and supply chain of purchasing.
Closed Stores
ParknShop was under Watson. Now it has around 300 supermarkets in Hong Kong and mainland China. Among them, Hong Kong accommodates over 250 stores whose sizes range from 2,000, 4,000 to 6,000 square meters. Now it has 9 segmented brands including supermarkets, TASTE, City Stores and internationals stores.
Though the company is affiliated to a famous brand, its development in Shanghai never walked on a smooth path.
According to the public data, ParknShop entered Shanghai early in 1994. But in 2000, ParknShop transferred its 14 stores in Shanghai to a local supermarket operator with only one store in West Nanjing Road. Though ParknShop established a shopping center in Yangpu District in 2006, the new shopping center was closed in a low profile only two years after its opening.
At the beginning of last year, ParknShop, which has undergone a lot difficulties, opened a new store in Gubei Area of Shanghai in the form of high-end supermarket brand TASTE. At that moment it had two stores in Shanghai– one in Gubei Area and the other in West Nanjing Road.
But even the new-born store did not survive long. In middle May, many members of ParknShop received a notion message, telling them that the ParknShop supermarket in West Nanjing Road was closed no long before and the TASTE Supermarket, which was only run for one year, was closed in the late May.
The ParknShop supermarket in West Nanjing Road was reported to launch “the last promotion campaign” before its closure. As ParknShop explained, the expiration of land-using contract was the main reason of closing stores.
Long-term Unfamiliarity
The “expired contract” given by ParknShop was partially true as the on-the-spot investigation revealed. According to several insiders from ParknShop, the store in West Nanjing Road, which had been there for 15 years, might be closed because of the expired contract. But that excuse definitely did not work for the TASTE Supermarket which has been run for only on e year. Generally speaking, the land-using contracts for business units last at least five years. In that way, TASTE Supermarket’s withdrawal could only be attributed to its underperformed operation.
Miss. Li, who was a frequent consumer to TASTE, said that she once saw only a dozen of consumers in the TASTE Supermarket covering over 4,000 square meters. The staff inside this supermarket said that it was normal. In comparison, a Carrefour supermarket which was not far away from it receives numerous visitors every day.
“The small number of consumers is attributed to the vague positioning of TASTE. It held the flag of high-end supermarkets, but 30% of its commodities inside the supermarket are imported from foreign markets. Compared with OLE, Jiuguang and Metro, which halved its domestic and imported products, TASTE has too few high-end products. But compared with ordinary supermarkets, the product prices inside TASTE is a bit high. Such a discomfort location cannot attract both high-end consumers and common buyers. Not so many people will choose TASTE,” said a source close to ParknShop.
It is known the TASTE Supermarket in Gubei Area covers 4,300 square meters and the investment amounted to 20 million yuan. When it was initially open, it stressed that half of the food it sold was imported. Jian Lihong, regional managing director of Watson Group said ambitiously at that moment that Guangdong and East China will be the key areas for the development of TASTE and hopefully 10-15 TASTE Supermarkets were to be opened in Shanghai in the next 6-7 years.
“ParknShop always had the problems of finding a suitable management method in Shanghai. The small number of consumers is caused by the insufficient high-end products, which should be attributed to the purchasing in East China. ParknShop recruits a few purchasing and management persons and a lot of products are directly bought from South China. Generally speaking, management over purchasing must be localized because the products need after-sale services, promotion, spreading and other campaigns. The lack of regional purchasing management leads to the maintenance of products or the fact that products on sales are not accepted by local consumers. The insufficient managers of ParknShop in Shanghai are also thought to be a reason for the ineffective localization,” said a source.
A high-end supermarket usually covers less than 4,000 square meters, but TASTE Supermarket in Gubei takes 4,300 square meters. In addition, without the influence of chain stores, ParknShop cannot decentralize its cost storage and logistics, which could also explain the closure of stores.